Moody's Cuts Shell Outlook Amid Slump In Prices Caused By Covid-19

(Alliance News) - Moody's Investors Service on Wednesday lowered its outlook for Royal Dutch Shell PLC amid collapsing oil and gas prices.

Shell's Aa2 long-term issuer rating was affirmed, but the outlook cut to Negative from Stable.

This follows a similar move earlier in the day by Moody's for peer BP PLC. BP's A1 rating was reaffirmed, but the outlook was likewise cut to Negative from Stable.

Aside from the two UK oil majors, Moody's changed Total SA's outlook to Negative from Stable earlier Wednesday, keeping its Aa3 rating for the French firm. On Tuesday, Moody's affirmed its Baa1 rating for Australia's Woodside Petroleum Ltd, but changed the outlook to Negative from Stable.

Commenting on Shell, Moody's said: "Changing the outlook on Shell's ratings to negative reflects the material impact that the collapsing oil and gas prices will have on the company's financial profile in 2020.

"While we expect that Shell's strong liquidity and financial flexibility, as well as a normalisation of oil and gas prices, will support a recovery of its credit metrics in 2021 to 2022, we consider it less certain whether our requirements for an Aa2 rating will be met over the next 12 to 18 months."

Brent was quoted at USD25.20 per barrel on Wednesday, having been as high as USD70 per barrel at the start of 2020.

Moody's said the rating remains supported by its overall strong business profile, backed by diversified production, large and resilient downstream operations, and a "unique" position as one of the world's biggest liquefied natural gas producers.

Shell has "strong" liquidity, Moody's continued, but the fall in prices does mean operating performance is going to suffer "materially" in 2020.

On Tuesday, Shell warned of a USD400 million to USD800 million impairment in the first quarter of 2020 due to the slump in oil prices, prompted by Covid-19 and a price war between Russia and Saudi Arabia. Similarly, BP on Wednesday guided for a USD1 billion quarterly charge.

Shell's 'A' shares were 1.0% higher on Wednesday afternoon at 1,433.00 pence each, with 'B' shares up 1.3% at 1,378p.

By George Collard; georgecollard@alliancenews.com

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